Italy's bond yields rose sharply on Monday, pushing the gap over Spanish peers to its widest since 2012, as fears over the big-spending plans of the two anti-establishment parties likely to make up Italy's next government continue to rattle investors.

Italy's bond yields rose sharply on Monday, pushing the gap over Spanish peers to its widest since 2012, as fears over the big-spending plans of the two anti-establishment parties likely to make up Italy's next government continue to rattle investors.

In early trade, two-year Italian bond yields jumped 14 basis points to 0.215pc, their highest since December 2016. Just a week ago, that yield traded at minus 0.20pc.

As 10-year Italian bond yields to rose to 10-month highs at 2.298pc, the gap over benchmark German Bund yields pushed out to 174 bps - the widest since October last year.

In a another sign that investors have ratcheted up Italy risks, the gap between 10-year Italian and Spanish bond yields was at 81 bps -- the widest since 2012 when the euro area was starting to emerge for a debt crisis.

The cost of insuring Italian government bonds against a default jumped to their highest in almost seven months at 128 bps, according to data from IHS Markit.

More than 90pc of Italians participating in an informal ballot have given their blessing to a policy agenda from the far-right League and the anti-establishment 5-Star Movement, as the two parties agreed on a candidate to lead their planned coalition government.

The two parties are expected to meet Italy's president on Monday.

The government "contract" between the League and the 5-Star, the two parties that won the most votes in the March 4 national election, calls for billions of euros in tax cuts, increased welfare payments for the poor, and the scrapping of an unpopular pension reform.

Investors, unnerved by a ramping up of spending in the euro zone's third biggest economy and its most indebted after Greece, have reacted by selling Italian bonds, stocks and the euro in the past week.

The euro slipped 0.3pc to $1.17305, while Italy's benchmark stock index was down 1.4pc, underperforming the broader European stock market.

"If Italy's President Mattarella lays out the constitutional boundaries to the government-to-be, it may calm some market nerves, but the anti-establishment parties' true colours cannot be unseen," said Benjamin Schroeder, senior rates strategist at ING.